2003 ANNUAL REPORT

Year ended August 31, 2003

FAST RETAILING CO., LTD.
Our Mission
FAST RETAILING CO., LTD., is a modern
Japanese company that owns and
operates the UNIQLO casual clothing
brand. Our mission is to inspire the
world to dress casual.

1
 Our Products
UNIQLO clothes can be worn anywhere, at anytime, and by anyone. Our goal is to continue
offering fashionable, superior-quality basic casual wear at the lowest possible prices.
We want people of all ages to enjoy wearing our basic casual clothes for their fabric, color, and style. From our warm,

light-weight but highly functional fleece jackets to our women’s merino rib turtleneck sweaters in 12 different colors,

we cater for one and all. Autumn 2003 also saw the launch of men’s shirts made from choice European fabric and

cashmere sweaters made from premium Inner Mongolian cashmere.

2
Our Production
FAST RETAILING maintains close control of all stages—from product planning, fabric
development and procurement, and manufacturing to distribution and sales.
Based on customer feedback from stores, our in-house team of professionals at the UNIQLO Design Studio develops

products that are manufactured by our trusted partner factories in China. Our Japanese technical experts—the Takumi

team—have more than 30 years of experience. They provide on-site training to ensure consistent, top-class quality.

Our new Strategic Fabric Team will build close relationships with fabric manufacturers worldwide and develop

innovative materials.

3
 Our Stores
We at UNIQLO put our customers’ needs ahead of our own. As the most direct link to our
customers, our stores are at the very heart of our business.
We have a network of more than 600 stores spanning the whole of Japan. The majority of our stores are free-standing,

roadside outlets located in suburban areas. But you can also spot our UNIQLO logo in shopping centers and on

downtown streets. By offering families a place where they can enjoy shopping together, our stores have become

a familiar part of everyday life in Japan.

4
Our Employees
A merit-based organization, FAST RETAILING fairly evaluates each employee’s ability and
performance regardless of age, gender, or nationality.
The quality of our products and customer service depends heavily on the caliber of our employees. Therefore,

nurturing and training our staff is of the utmost importance. A good example of our emphasis on each employee’s

ability is the superstar (SS) store manager system. Under this system, we give SS store managers considerable

discretion in store operations. As an incentive, managers receive a share of store profits, which can be considerable

when their store performs well. We look forward to the day when all of our managers become superstars.

5
 Our Ambition
We aim to become the world’s top casual clothing company.
We have consistently set our sights high because we strongly believe that there is no life without growth and no

success without expansion. We have already gained valuable experience by setting up operations in the United

Kingdom and China, and our strategy is to enter other Asian markets and the U.S. market in the near future. We are

looking to use our excess cash for possible mergers and acquisitions that will achieve synergies with our UNIQLO

operations. Our ambition is to become a corporate group with sales of ¥1 trillion by 2010.

Worldwide Apparel Specialty Stores

Company Name Fiscal Year Billions of Yen
Gap U.S. FY 2002 1,693.4
Limited Brands U.S. FY 2002 989.3
Hennes & Mauritz Sweden FY 2002 739.2
Inditex Spain FY 2002 507.0
Liz Claiborne U.S. FY 2002 435.5
Next U.K. FY 2003 407.3
FAST RETAILING Japan FY 2003 309.8
Polo Ralph Lauren U.S. FY 2003 285.8
Benetton Group Italy FY 2002 254.1
Tommy Hilfiger U.S. FY 2003 221.2
Matalan U.K. FY 2003 188.9
Abercrombie & Fitch U.S. FY 2003 186.9
Talbots U.S. FY 2002 186.9
Esprit Hong kong FY 2003 186.0
American Eagle Outfitters U.S. FY 2002 171.4
Note: Yen amounts have been translated using the approximate Tokyo foreign exchange
market rate as of August 29, 2003.

6
Social Contribution and Environmental Projects

Regardless of its performance, a company should consider more than just business. As well as always giving
our best in business, we must also make positive contributions to society.

Fleece-Recycling Program Initiatives for the Mentally and Physically Challenged

We collect and recycle used UNIQLO FAST RETAILING supports the Special
fleeces from our customers. As of October Olympics Japan, which promotes the
2003, we had collected more than 126,000 participation of people with mental and
items. These are then made into such physical disabilities in sports and in society
products as soundproofing materials and as a whole. Under Japanese law, at least
sheets for construction sites. FAST 1.8% of a company’s workforce must
RETAILING is not just about manufacturing comprise employees with disabilities. As of
and retailing. We seek to take our August 2003, employees with disabilities
operations one step further and, to that end, made up 6.8% of UNIQLO’s staff. As a
will continue striving to develop recycling company seeking to create clothes that
methods for clothing other than fleeces. everyone can wear, FAST RETAILING also
wants to create a workplace in which
everyone can work.
Photograph provided by Special
Olympics Nippon

Seto Inland Sea Olive Foundation Uniforms for Japan’s Olympic Team
Teshima, an island situated in the Seto Following on from the 2002 Winter
Inland Sea, has lost a great deal of its Olympics in Salt Lake City, FAST
greenery due to contamination from the RETAILING will again make—free of
illegal dumping of toxic industrial waste. charge—Japan’s official team uniform for
Kohei Nakabo and Tadao Ando established the 2004 Summer Olympics in Athens. To
the Seto Inland Sea Olive Foundation in be created by designer Kenzo Takada
2000 with the aim of planting one million based on the concept of Show Your Colors,
trees, mainly olive, on Teshima and other the uniform will allow members of Japan’s
islands of the Inland Sea. We have set up Olympic squad to express their
donation boxes at all UNIQLO stores to individuality.
give customers the chance to contribute to
the foundation, and we match the amount
of money collected.
Photograph provided by Sugano Kenji
7
 Consolidated Financial Highlights
FAST RETAILING CO., LTD. and consolidated subsidiaries
Fiscal years ended August 31
Thousands of
U.S. dollars
Millions of yen except per share data except per share data % change
2003 2002 2001 2003 2003 vs 2002

For the Year:

Net sales ........................................................ ¥309,789 ¥344,171 ¥ 418,561 $2,644,379 –10.0%
Operating income ........................................... 41,308 50,418 102,081 352,608 –18.1
Net income ..................................................... 20,933 27,851 59,192 178,685 –24.8
ROE (%) .......................................................... 15.9% 23.2% 65.3%

Per share data (yen and U.S. dollars):

Net income ................................................. ¥203.05 ¥269.54 ¥1,119.28 $1.73 –24.7
Cash dividends:
Adjusted .................................................. 55.00 55.00 60.00 0.47 —
Unadjusted .............................................. 55.00 90.00 120.00 0.47 —

At year-end:
Cash and cash equivalents ............................. ¥123,733 ¥ 107,263 ¥ 157,379 $1,056,193 +15.4
Total assets .................................................... 219,855 210,922 249,766 1,876,697 +4.2
Total shareholders’ equity ............................... 140,505 123,632 116,476 1,199,359 +13.6

Number of issued and outstanding shares ...... 106,073,656 106,073,656 53,036,828

Total number of stores
(including franchise stores) ............................. 622 585 519
Note: U.S. dollar amounts have been translated for convenience only at the rate of ¥117.15=US$1, the approximate exchange rate prevailing
on August 31, 2003.

Highlights of the Year

• Net sales of ¥309.8 billion and operating income of ¥41.3 billion exceeded initial estimates despite lower
revenues and earnings.

• Second-half revenues and earnings were up from the same period of the previous year, with net sales rising
3.7%, to ¥144.4 billion, and operating income increasing 50.5%, to ¥18.1 billion. FORWARD-LOOKING STATEMENTS
Statements in this annual report, other than
• Monthly sales at existing stores posted the first year-on-year increase in 23 months in August 2003. those of historical fact, are forward-looking
statements about the future performance
• Annual dividends were maintained at ¥55.00 per share, for a payout ratio of 26.7%. of FAST RETAILING that are based on
management’s assumptions and beliefs in
• The decision was made to acquire an ownership interest in U.S. company Theory LLC and a stake in Link light of information currently available, and
involve known and unknown risks and
International Co., Ltd. (September 2003). uncertainties. Actual events and results may
differ materially from those anticipated in
• Our first stores in Shanghai, China, were opened, while our U.K. store network was strategically downsized. these statements.
8
A Message from the Chairman

I want to share with you my ambition of making FAST RETAILING challenges we face and to turn my business aims into reality. I am

a corporate group with sales of ¥1 trillion by 2010. As that aim confident our tireless efforts to build a competitive company that

suggests, our corporate strategy going forward is one of achieving aims high will see UNIQLO become a worldwide brand.

positive growth and expanding our horizons.

Whether a company or an individual, I firmly believe that we have November 2003

to make every effort to create and mold our own future. There is no

other way to be highly successful in whatever it is we are doing.

And, if we embark on something, we might as well make a success

of it. Setting high goals helps us to grow and that, in turn, leads to

greater success. That is and always has been our underlying Tadashi Yanai

business concept. Chairman & Chief Executive Officer

Having said that I want to make FAST RETAILING a ¥1 trillion

corporate group by 2010, of course there are several hurdles that

we must overcome to realize that goal.

One is to enhance the appeal of our UNIQLO clothes in the

Japanese market. Another is to develop our operations overseas.

And, we need to move into new business areas that have clear

synergies with our UNIQLO operations and promote our

diversification.

By getting over these hurdles, FAST RETAILING should succeed

in generating higher income levels and attaining rapid growth.

I strongly believe that there is no life without growth and no

success without expansion. I plan to continue tackling head-on the

9
 An Interview with the President

Q. You became president of FAST RETAILING about a year ago. Second, because we have full control over our integrated system
How did the Company meet its targets for fiscal 2003, ended from production through sales, we can maintain gross profit margins
August 31, 2003? simply by adjusting manufacturing output. In fiscal 2003, the gross
A. Even though revenues and earnings were down from the previous profit margin improved from 43.7% in the previous year to 44.2%.
fiscal year, we exceeded our initial estimates, with consolidated net Moreover, in the second half it rose 2.9 percentage points year on
sales of ¥309.8 billion and operating income of ¥41.3 billion in fiscal year, to 45.7%. Not only did we improve the gross profit margin, but
2003. We were able to meet our targets for sales, gross margins, we also reduced consolidated inventories 32.7% from the previous
and SG&A expenses thanks to three key factors. year-end—a considerable achievement.
First, changing our product strategy had a favorable impact on And third, we made cost control one of our top priorities in fiscal
sales. In particular, we attracted larger numbers of women in their 2003. Our goal was to secure higher profit despite net sales of ¥300
30s by offering products with a fashion flavor. There has also been billion—down from the fiscal 2001 peak of ¥400 billion. In that
an upward trend in customer numbers year on year at existing respect, a ¥4.2 billion reduction in SG&A expenses year on year was
stores since April 2003. another major achievement.

10
Q. You mentioned that changing your product strategy helped September 2003, we set up the Strategic Fabric Team. This team
boost sales. What concrete changes have you made? will look to establish relationships with world-class fabric producers
A. We freshened up our offerings by expanding our lineups of to create new quality, reasonably priced clothes in the way that
fashionable items, which attracted more female customers to our UNIQLO is famous for.
stores. As a result, the women’s clothing category, accounted for As for our stores, we want managers and sales staff to focus more
25.0% of net sales, up 2.9 percentage points from the previous aggressively on attaining sales and profit growth. All store managers
fiscal year. are being encouraged to set numerical performance targets for their
Sales of women’s clothing are climbing steadily, putting us on stores. We are also enhancing our training for store managers and
track to realize our medium-term target of growing the category to supervisors through the UNIQLO University program.
account for more than 30% of net sales. Regarding our operational infrastructure, we are steadily
implementing our G4 Project. The aim is to build production
Q. In fiscal 2004, FAST RETAILING is expected to post increased adjustment systems to avoid product shortages or oversupply. The
revenues and earnings for the first time in three years. What are G4 project is not simply about installing new operational software
your strategies for the year ahead? systems but involves a review of all operational flows from scratch.
A. We aim to expand market shares for both men’s and women’s In summer 2003, several new systems developed at head office
clothing. In addition, we will make greater inroads into the came online. And, we plan the staged renewal of other operational
underwear and loungewear markets by launching new products, systems over the next few years.
such as bras. In women’s clothing, we will work to complete our
UNIQLO WOMEN collection by continuing to develop appealing Q. Which products have been popular with customers in the
lineups that strike a balance between basic casuals and more 2003 fall/winter season so far?
fashionable items. Regarding men’s clothing, last year we ran out of A. This season, we experimented with some new, actually quite
stock of some basic summer items. This was a timely reminder of outstanding garments. For example, cashmere sweaters that hit
how popular basic items are among our male customers and how stores this fall. Sales have already surpassed initial estimates,
key these items are to our overall product lineup. With that in mind, despite the fact that this is the first time UNIQLO stores have carried
this year’s focus for men’s clothing will be to enhance the quality of cashmere sweaters. We estimate that we have already won about
basic items by selecting only the best fabrics and designs. In 20% of Japan’s cashmere sweater market. Not only have we

11
 ensured quality by using only the finest cashmere yarn from Inner spring/summer women’s collection.
Mongolia, but we are offering the sweaters at extremely low prices— Also, our flexible inventory control system minimizes the risk
only ¥7,900 for a men’s sweater and ¥4,900 for a women’s short- of being left with unsold stock. We control inventories of both
sleeved turtleneck. Our strategy is to create demand by making fashionable items and basic items by analyzing weekly sales and
these lines affordable to customers who have never worn cashmere. inventory data in detail. If a particular product isn’t selling well, we
either bring forward scheduled price discounts or halt production.
Q. By incorporating some fashion elements into your women’s
clothing, do you increase the risk of unsold merchandise? Q. Does FAST RETAILING have less of an advantage in the
A. No, I don’t think so. On the whole, companies that handle fashion casual clothing market than it used to?
garments do tend to carry excess inventory. While some of our A. Although competition in the casual wear market is becoming
clothes have a fashion flavor, they remain first and foremost basic fiercer every year as more foreign companies enter the Japanese
casuals that customers of any age group can wear. And thanks to market, we will not sacrifice quality in a bid to lower prices. In fact,
brisk sales, we were left with no excess inventory from our 2003 our integrated system from production through sales still gives us a

12
considerable competitive edge by enabling us to rapidly develop Q. Is the UNIQLO baby-wear line selling well?
and bring to market high-quality, low-priced basic casuals that meet A. Baby-wear sales have been brisk since we launched the line in
customer needs. summer 2002. At the approximately 200 UNIQLO stores that sell
Over the past few years, our casual wear has become extremely baby clothes, the growing popularity of the products has boosted
popular in the Japanese market. But, there is always more to do. We customer visits. By further enhancing our baby-wear lineups, we aim
continue to work hard to create new basic casuals that break the to attract more young mothers in their 20s and 30s. Looking ahead,
mold by offering outstanding quality at unheard-of prices. we are confident that baby-wear will continue to draw customers.

Q. What level of sales is needed at existing stores to achieve Q. FAST RETAILING opened only 32 new UNIQLO stores in
nonconsolidated net sales of ¥330 billion in fiscal 2004? Japan in the second half of fiscal 2003. What are your store
A. We estimate that 1.1% year-on-year sales growth at existing opening plans for the current fiscal year?
stores will produce nonconsolidated net sales of ¥330 billion. In A. We intend to resume a steady pace of store openings, with a net
fiscal 2003, sales at existing stores were down 19.7% year on year increase of 50 stores planned for fiscal 2004. We expect to open 90
due to decreases of 9.3% in the number of customers visiting stores new stores and to close 40, giving a total of 645 stores at the end of
and 11.5% in average sales per customer for the full fiscal year. fiscal 2004. Let me point out that none of our stores are making a
In the second half of the year, however, the decline in customer loss. However, we do need to look at raising store efficiency. Large-
numbers bottomed out year on year, edging down 0.2%, while the scale stores with sales floors between 700 and 1,000 square meters
decrease in average sales per customer was only 8.5%. In fiscal are much more effective for marketing new underwear and
2004, we aim to attract more customers by enhancing the appeal loungewear lines and boosting the share of women’s wear.
of our clothes and implementing effective sales campaigns. However, of a total 595 stores at the end of August 2003, only about
Despite the ongoing decline in sales per customer, our pricing 200 were large-scale stores. We are therefore mainly opening new,
strategy remains unchanged. The prices of some new products large-scale stores. Specifically, we are focusing on scrapping small
made from premium fabrics, such as cashmere sweaters, Italian fine stores with sales floors less than 500 square meters or parking for
merino sweaters, and men’s shirts made from high-quality fabrics less than 30 vehicles and then building large-scale stores nearby.
produced in Europe, are slightly higher. However, our standard Almost all of the 40 stores to be closed this year come under this
prices remain the same, at ¥1,000, ¥1,900, and ¥2,900. scheme.

13
 Q. How are you motivating your staff to become more results In the United Kingdom, we downsized our operations to 5 stores
oriented and how do you see the employee franchise store by closing 16 stores in June 2003. We realized that we had given too
system contributing? much priority to the goal of opening 50 stores in three years. We
A. Our superstar store manager system is one merit-based scheme therefore decided to change our strategy, contracting the business
in place. And, we are also hoping to encourage more managers to and focusing on the profitability of each store. Once that solid
consider employee franchises. Store manager Toshiji Yanaga foundation is established, we can again look to expand our U.K.
opened our first employee franchise store in Kurume Kamitsu in operations. Sales at the remaining five stores are firm, and we
October 2003. Although he is the only person participating in the expect the U.K. subsidiary to post a profit in fiscal 2004.
employee franchise store system, there are several candidates who Based on our experience in the United Kingdom, we will expand
may take advantage of the system in the current fiscal year. our operations in China gradually, paying close attention to the
Ultimately, we would like to see each and every one of our 600 store performance of each store with a view to realizing overall profitability
managers become franchisees. But to ensure the success of the in fiscal 2005. At the end of fiscal 2003, we had five stores in
system, we know we must assess potential franchisees carefully. So Shanghai, and we believe there is substantial growth potential for
for now, we are targeting around 10 to 20% of store managers to our casual wear operations in the Chinese market.
become franchisees over about the next five years. In the medium term, we have also set our sights on entering the
U.S. market and other Asian markets. However, at present our
Q. What is FAST RETAILING’s strategy in overseas markets, priority is to turn a profit at our U.K. and Chinese businesses.
including the United Kingdom and China?
A. We want to continue taking on the challenge of establishing a Q. What was the thinking behind the Company’s decision to
presence overseas. Just as foreign competitors are entering the acquire U.S.-based Theory LLC in collaboration with Link
Japanese market, we are developing our operations abroad. This is International Co., Ltd.?
because we believe that if we can’t win in world markets, then we A. We decided to acquire an ownership interest in Theory because
can’t be truly competitive in our domestic market either. With this in of its strong profitability and potential for growth. Launched in New
mind, over the next few years we hope to enter the U.S. market and York in 1996, the theory apparel brand has become popular among
to build a greater presence in other Asian markets. modern contemporary men and women in the U.S. and Japan, and it

14
has annual combined sales of more than ¥20 billion. annual earnings equally between retained earnings to ensure stable
In Japan, Link is the licensee for the theory brand. In September growth, active investment and M&A in related businesses, and
2003, FAST RETAILING and Link agreed to jointly acquire an higher shareholder dividends.
ownership interest in Theory. Under this agreement, Link will own
89.0% of Theory’s stock and FAST RETAILING will take a 47.1% November 2003
stake in Link. As a result, Link will become an affiliate of FAST
RETAILING accounted for by the equity method.
We will work with Link to develop theory into a global brand. FAST
RETAILING not only aims to develop a network of directly managed
theory stores in the United States based on Theory’s existing
wholesale operations, but it also intends to break into European
and Asian markets. In the medium term, we may even consider Genichi Tamatsuka
collaborating with Theory with a view to launching new brands. President & Chief Operating Officer
In addition, Theory’s local connections and expertise in the U.S.
apparel industry will provide FAST RETAILING with a useful
bridgehead into the U.S. market.

Q. With respect to FAST RETAILING’s year-end cash balance of

¥120 billion, what are the Company’s investment plans and
policy on returning profits to shareholders?
A. Cash and cash equivalents at the end of fiscal 2003 stood at
¥123.7 billion. FAST RETAILING aims to increase its corporate value
by pursuing M&A or investments targeting companies that can
achieve synergies with its UNIQLO operations and help reach its
sales target of ¥1 trillion by 2010. To those ends, we will allocate

15
 UNIQLO’s Business Model

Share Sales and

Production Information FAST RETAILING
60 Factories in China

Factory Factory Products

617* Stores in Japan

Conventional-Type Stores
New Large-Type Stores

FAST RETAILING 5* Stores in U.K.

Raw
Materials Shanghai Offices Customers
Production Management 8* Stores in Shanghai
Quality Control
Direct Sales
Takumi Team
Catalog & Internet Sales

Customer Center

Headquarters
Material
Direct Contact Merchandising
Manufacturers Promotion & Marketing
Distribution & Inventory Control
Store Operation Support

UNIQLO Design Studio

* As of November 30, 2003

16
Factors Underlying UNIQLO’s High Profitability

Operating = Net Sales Purchasing Costs SG&A Expenses

– –
Income (1. standard prices – 2. discount) (3. raw material costs + 4. sewing and knitting costs + other purchasing costs) (5. personnel + 6. rents + other SG&A expenses)

Net Sales 1. standard prices Most prices are set at ¥1,000, ¥1,900, or ¥2,900, and we will maintain these as our standard prices. For example:
T-shirts, ¥1,000; fleece jackets, ¥1,900; chino pants, ¥2,900.

2. discount We have two types of discount sales: limited-period sales and clearance sales.

limited-period sales “Limited-period sales” are price reductions aimed at attracting customers. These discounts are only offered for specified
periods, such as “weekends only.” Following this discount period, prices return to standard.

clearance sales “Clearance sales” are price reductions aimed at reducing slow-moving inventories. We take on 100% of the risk for
products ordered from factories in China. Our flexible production management system allows us to increase or
decrease output levels to reflect sales information. Consequently, we are able to minimize the deterioration of the gross
profit margin resulting from clearance sales.

Purchasing Costs 3. raw material costs We are able to minimize raw material costs through the economies of scale represented by our network of 600 stores in
Japan—the largest in the industry. In addition, we are able to reduce materials costs by guaranteeing 100% purchase of
raw materials ordered. For example, by industry standards, sales on a scale of 100,000 items for one product would be
classified as a major hit product. However, this figure does not represent large-scale sales for FAST RETAILING;
100,000 items is less than 10 items per store on an SKU (Stock Keeping Unit) basis:
100,000 items ÷ 581 stores ÷ (5 colors X 4 sizes) = 8.6 items
Furthermore, our size enables us to conduct direct price negotiations with major international fabric manufacturers. It
also allows us to aggressively pursue joint development of new materials, such as highly functional “air-tech” material.

4. sewing and knitting We minimize sewing and knitting costs by improving efficiency and taking on 100% of the risk for production at
costs consignment factories. We actively transfer technology to consignment production factories in China, which we view
as long-term partners. The Takumi team at our offices in Shanghai is a group of Japanese technical experts who
are highly experienced in such areas as sewing and plant management. These employees go directly to consignment
production factories and pass on the textile technology expertise they have acquired in Japan over 30-45 years to
young Chinese technicians. Through such hands-on initiatives, we are working to improve the product quality and
efficiency of consignment production plants.

SG&A Expenses 5. personnel Part-time employees at stores account for most of personnel expenditure. We have been able to standardize store
operations as a result of our stores’ uniform layout, displays, shelves, and fitting rooms and our limited store types
(conventional-type: 500m2; new large-type: 800m2). This allows us to run UNIQLO stores with minimum numbers of
personnel.

6. rents Since the majority of our stores are free-standing, roadside outlets in suburban areas, the ratio of rents to sales is kept
low. And, when we open stores in urban areas or in shopping centers, we conduct detailed preliminary sales
simulations to ensure that we avoid excessive rent burdens.

17
 Corporate History

March 1949 November 1997 April 2001

• Men’s Shop Ogori Shoji founded as a private enterprise • The Company’s sales network grew to more than 300 • Joined with the Japanese Olympic Committee in an
in Ube City, Yamaguchi Prefecture. direct-run stores (309) and 11 franchise stores. official sponsorship.
• The Company’s sales network grew to more than 500
May 1963 February 1998 direct-run stores (507) and 12 franchise stores.
• Ogori Shoji Co., Ltd., established, with capital of • Head Office constructed in Yamaguchi City, Yamaguchi
¥6 million, as a successor to the original business. Prefecture, to further enhance central management August 2001
functions and operational efficiency. • Established FAST RETAILING (JIANGSU) APPAREL
June 1984 • To strengthen in-house merchandise development, CO., LTD., a 71.43% equity subsidiary, as the
• The first UNIQLO store, specializing in casual clothing, Osaka Office and Tokyo Office closed and integrated cornerstone of future business development in China.
opened in Hiroshima City (UNIQLO Fukuromachi store; into a single office set up in Shibuya.
closed in August 1991). September 2001
November 1998 • Opened four stores in the United Kingdom, in
September 1991 • The first downtown store opened in the fashionable Knightsbridge, Wimbledon, Uxbridge, and Romford.
• The Company’s name changed from Ogori Shoji to Harajuku district of Tokyo.
FAST RETAILING, a name that succinctly expresses its April 2002
business philosophy. February 1999 • To bolster product development capabilities, UNIQLO
• The Company’s stock listed on the First Section Design Studio established as an independent
March 1994 of the Tokyo Stock Exchange. organization with approximately 50 designers and
• To maximize efficiency, central management functions, pattern makers from FAST RETAILING.
previously dispersed, transferred to the Company’s April 1999
newly constructed Head Office in Ube City, Yamaguchi • Shanghai Office established to further enhance September 2002
Prefecture. production management operations. • Spun off food products project to establish FR FOODS
CO., LTD.
April 1994 September 1999 • Opened Shinjuku-sanchome store, with a strong
• The Company’s sales network grew to more than 100 • Guangzhou Office established. emphasis on women’s clothing.
direct-run stores (109) and 7 franchise stores. • Trial run of catalog sales conducted to explore the • Began operations in China by opening two stores
development of new sales avenues. in Shanghai.
July 1994
• The Company’s stock listed on the Hiroshima Stock April 2000 November 2002
Exchange (which was abolished in 2000). • The Company’s sales network grew to more than 400 • Started full-fledged operation of food business under
direct-run stores (417) and 12 franchise stores. the SKIP brand name.
February 1996 • To promote merchandising and marketing and to carry • Opened large-type store in Sannomiya, Kobe, which
• FAST RETAILING entered into a joint venture with out operations more efficiently, new Tokyo Office will become the Company’s flagship store in western
Nichimen Corp. and local capital in Shandong established integrating merchandising functions from Japan.
Province, China. FAST RETAILING took a 28.75% the Yamaguchi Prefecture Head Office and the Tokyo
equity interest in the venture, with the aim of securing Design Office. August 2003
a reliable supply of products. • UNIQLO (U.K.) LTD. established as part of the
June 2000 restructuring of U.K. operations.
March 1996 • Established FAST RETAILING (U.K.) LTD.
• The Company’s sales network grew to more than 200 • Prepared to set up shops in train stations, through a September 2003
direct-run stores (205) and 10 franchise stores. tie-up with East Japan Railway Co. and its related • Decided to acquire an ownership interest in U.S.
KIOSK stores. company Theory LLC and to become a shareholder of
November 1996 Link International Co., Ltd.
• Tokyo Office opened in Shibuya, Tokyo, to reinforce October 2000
the Company’s in-house product planning and • Internet online sales business launched to foster new November 2003
development capabilities. sales channels and improve customer convenience. • The Company’s network of UNIQLO stores in Japan
grew to more than 600 direct-run stores (603) and
April 1997 14 franchise stores.
• The Company’s stock listed on the Second Section
of the Tokyo Stock Exchange.
18
Financial Section
SIX-YEAR FINANCIAL SUMMARY ............................................................. 20

MANAGEMENT’S DISCUSSION AND ANALYSIS ..................................... 21

CONSOLIDATED BALANCE SHEETS ....................................................... 26

CONSOLIDATED STATEMENTS OF INCOME ........................................... 28

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY .............. 29

CONSOLIDATED STATEMENTS OF CASH FLOWS .................................. 30

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS .......................... 31

INDEPENDENT AUDITORS’ REPORT ....................................................... 37

19
 Six-Year Financial Summary
FAST RETAILING CO., LTD. and consolidated subsidiaries
Fiscal years ended August 31

Millions of yen except per share data and other data

2003 2002 2001 2000 1999 1998
For the year:
Net sales ..................................................................................... ¥309,789 ¥344,171 ¥418,561 ¥228,986 ¥111,082 ¥83,121
Operating income ........................................................................ 41,308 50,418 102,081 60,628 14,344 6,840
Net income................................................................................... 20,933 27,851 59,192 34,514 6,817 2,924
ROE (%)........................................................................................ 15.9% 23.2% 65.3% 70.2% 22.9% 11.9%

Per share data (yen):

Net income ............................................................................. ¥ 203.05 ¥ 269.54 ¥1,119.28 ¥1,303.35 ¥ 259.51 ¥111.49
Shareholders’ equity .............................................................. 1,378.58 1,215.43 2,203.45 2,446.34 1,270.47 991.58
Cash dividends:
Adjusted............................................................................ 55.00 55.00 60.00 37.50 6.75 2.50
Unadjusted........................................................................ 55.00 90.00 120.00 150.00 27.00 10.00
Dividend payout ratio (%)....................................................... 26.7% 20.1% 10.7% 11.5% 10.5% 9.0%

Net cash provided by (used in) operating activities*................. ¥ 35,768 ¥(19,361) ¥ 80,581 ¥68,790 ¥ — ¥ —
Net cash used in investing activities* ...................................... (10,118) (9,927) (13,199) (5,085) — —
Net cash used in financing activities*...................................... (10,179) (20,431) (10,955) (3,766) — —
Depreciation and amortization .................................................... 2,364 1,942 1,571 805 741 653
Capital expenditures .................................................................... 11,633 11,020 13,474 6,218 3,363 6,127

At year-end:
Cash and cash equivalents ......................................................... ¥123,733 ¥107,263 ¥157,379 ¥ 99,670 ¥39,768 ¥14,204
Total assets** ............................................................................... 219,855 210,922 249,766 151,607 73,552 47,848
Total shareholders’ equity** ........................................................ 140,505 123,632 116,476 64,755 33,618 26,009
Equity ratio (%)............................................................................. 63.9% 58.6% 46.6% 42.7% 45.7% 54.4%
Long-term debt ............................................................................ — 4,000 7,000 10,000 10,000 —
Debt-equity ratio (%).................................................................... — 4.7% 6.0% 15.4% 30.6% —

Other data:
Number of shares outstanding.................................................... 106,073,656 106,073,656 53,036,828 26,518,414 26,461,005 26,229,924
Total number of stores ............................................................... 622 585 519 433 368 336
Direct-run stores in Japan ............................................... [582] [558] [507] [421] [357] [325]
Franchise stores in Japan ................................................ [14] [12] [12] [12] [11] [11]
Overseas stores .............................................................. [26] [15] [—] [—] [—] [—]
Total sales floor space (m2) ......................................................... 335,849m2 305,504m2 263,713m2 186,801m2 157,424m2 143,487m2
Number of full-time employees .................................................. 1,844 1,853 1,598 1,265 1,055 950
* Statements of cash flows are disclosed from the fiscal year ended August 31, 2000.
** Due to changes in regulations relating to financial statements, treasury stock, which was recorded in “Investments and other assets” in the balance sheets
until the fiscal year ended August 31, 2001, is recorded as a deduction item in “Shareholders’ equity”.

20
Management’s Discussion and Analysis

STORE NETWORK In overseas and new businesses, the U.K. subsidiary opened 6 stores and had 21
Basic Strategy stores at May 31, 2003, its fiscal year-end. However, 16 of those stores were closed
FAST RETAILING will aggressively open new stores with a view to establishing in June. In China, a new market for us, our apparel subsidiary opened five stores,
a 1,000-store network in Japan in the near future. However, in undertaking our and our newly launched food subsidiary opened one store.
network expansion activities we will not compromise on profitability; each new store Total sales floor space at fiscal year-end rose 30,345 square meters, to 335,849
has to satisfy stringent profitability benchmarks. Our network development strategy square meters. Thanks to efforts to expand the size of existing stores, the average
is focused on opening free-standing stores at suburban roadside locations in areas sales floor space per operational store increased 1.9% from the previous fiscal year,
where UNIQLO has yet to have a presence. These stores have low ratios of rent to to 545 square meters.
sales, which make them highly profitable. We attract customers to these roadside
stores by inserting fliers in newspapers to advertise such sales campaigns as Number of stores opening and closures in Japan
weekend-only discounts. As we develop our store network, we also aim to increase 2003 2002 2001 2000 1999

store size to accommodate expanded lineups of such products as underwear and Stores opened .................................... 76 77 111 67 38
Stores closed ..................................... 53 26 25 3 6
women’s and children’s clothing. In line with its scrap-and-build strategy, FAST
Net increase .................................... 23 51 86 64 32
RETAILING is opening stores based on a new standard sales floor space of 800
Note: The above figures are for direct-run UNIQLO stores only.
square meters while closing its existing 500-square-meter-type stores. As a result of
such efforts in recent years, the ratio of large-scale stores in the domestic network
Net increase (decrease) in stores by region
has been steadily increasing, accounting for one-third at fiscal year-end.
2003 2002 2001 2000 1999
At our stores in the United Kingdom and China, we offer lineups with roughly the
Hokkaido – Tohoku ............................ 9 11 7 5 4
same standard prices as at our UNIQLO stores in Japan. In June 2003, we closed
Kanto ................................................. 1 28 54 41 16
16 U.K. stores that were performing poorly and focused management resources on
Chubu ................................................ 8 6 9 5 2
the 5 remaining stores. We do not plan any further store openings in the United
Kansai ................................................ 2 5 11 10 10
Kingdom in fiscal 2004, ending August 2004. Instead, our main goal is to achieve Chugoku ............................................ –1 0 3 1 1
profitability in our U.K. operations in the current year. In China, where we launched Shikoku .............................................. 1 1 1 0 –1
our first stores in September 2002, we will carefully assess profitability before Kyushu – Okinawa .............................. 3 0 1 2 0
opening additional stores. United Kingdom ................................. 6 15 – – –
China .................................................. 5 – – – –
Store Openings and Closures Breakdown of Total Total ............................................... 34 66 86 64 32
Direct-Run Stores by Region
In Japan, we opened 76 direct-run Note: The above figures are for direct-run UNIQLO stores only.
U.K.: 21
UNIQLO stores and closed 53, giving a China: 5 FR FOODS: 1
Hokkaido – Tohoku: 58
net increase of 23 direct-run stores in RESULTS OF OPERATIONS
fiscal 2003. This comparatively low annual Net Sales
Kanto: 226
growth in store numbers was the result of In fiscal 2003, ended August 31, 2003, FAST RETAILING posted a ¥34.4 billion, or
Japan: 582
a more conservative approach to store 10.0% decrease in consolidated net sales, to ¥309.8 billion. Nonconsolidated sales
openings that emphasized profitability and Chubu: 91 were down 11.7% from the previous fiscal year, to ¥301.8 billion. While new store
the aggressive implementation of a scrap- openings gave a net increase of 23 domestic direct-run UNIQLO stores at year-
Kansai: 102
and-build policy focused on increasing end, sales at existing stores fell 19.7% year on year. However, second-half
Chugoku: 23
average store size. At fiscal year-end, we Total Stores: Shikoku: 18 nonconsolidated sales were up 1.7% from the same period of the previous year,
608 Kyushu – Okinawa: 63
had 581 direct-run UNIQLO stores and 14 to ¥139.8 billion. Although this turnaround was partly attributable to new store
franchise stores, for a total of 595 stores. (As of the end of fiscal 2003) openings, the slowdown of the year-on-year decline in sales at existing stores in the
21
 second half also contributed to the upturn. In fact, we substantially reduced the Gross Profit Margin
26.8% drop in first-half sales at existing stores to 8.7% in the second half. Year-on- The gross profit margin increased 0.5 percentage points, to 44.2%. Compared with
year monthly sales at existing stores increased for the first time in 23 months in gross profit margins of 43.7% in the previous fiscal year and 42.9% in the first half
August 2003. In addition, the decrease in average sales per customer year on year of fiscal 2003, it is particularly noteworthy that in the second half the gross profit
at direct-run stores slowed from 12.8% in the first half to 8.5% in the second half. margin improved to 45.8%. For three consecutive half-year periods through the first
We also saw a recovery in customer numbers at direct-run stores—from a 7.5% half of fiscal 2003, sales remained well below targets. During that time, increased
year-on-year decrease in the first half to an 8.1% increase in the second half— price discounts associated with the disposal of end-of-season surplus inventory
thanks to successful sales campaigns and enhanced product appeal targeting or inventory carried over from previous years’ seasons led to an unavoidable
mainly the women’s clothing category. deterioration in gross margins. In the second half of fiscal 2003, however, we were
Overseas, our U.K. subsidiary registered sales of ¥6.8 billion in its second year of able to minimize such price discounts thanks to higher-than-expected second-half
operations. In fiscal 2003, our subsidiary in China and our food business subsidiary sales that prevented inventory surpluses and to disposals of carry-over inventory
began operations, posting sales of ¥0.6 billion and ¥0.7 billion, respectively. that had been implemented by the end of the first half.
By product category, although overall sales decreased, sales in the women’s
clothing category, accounting for 25.0% of total sales, and the children’s clothing SG&A Expenses
category, representing 6.5%, rose as a result of enhanced product appeal. The Company reduced selling, general and administrative (SG&A) expenses ¥4.2
billion, to ¥95.8 billion. This success was due to enhanced operational efficiency
Sales by product category made possible by the stabilization of sales and an across-the-board review of
Millions of yen
expenses that heightened all employees’ cost awareness. However, the ratio of
2003 2002 2001
SG&A expenses to net sales rose 1.9 percentage points, to 30.9%, because of the
Children’s clothing .......................................... ¥ 20,193 ¥ 19,818 ¥ 23,701
Women’s clothing............................................ 77,587 76,077 99,411 decline in sales. Personnel costs decreased ¥2.3 billion, to ¥34.1 billion, while the
Outerwear ....................................................... 18,312 26,017 24,799 ratio to net sales edged up 0.4 percentage points, to 11.0%. Advertising and
Sweaters ........................................................ 12,930 15,665 18,498 promotion cost were maintained at roughly the same level as in the previous fiscal
Cut & sewn ..................................................... 69,150 86,666 109,495 year, edging down ¥0.4 billion, at ¥19.3 billion. In our view, reducing expenditure on
Shirts .............................................................. 18,771 22,934 28,162
Slacks (pants) .................................................. 29,532 32,783 36,943
Accessories and underwear ............................ 56,850 59,182 72,539 Year-on-Year Sales Trend
Subtotal ....................................................... 303,325 339,142 413,548 at Existing Stores
Net Sales (UNIQLO Stores in Japan)
Products supplied to franchise stores ............. 3,906 3,676 4,280
(Billions of yen) 418.6 (%)
Administrative charges .................................... 1,375 1,087 584
67.7
Fees from in-store alterations .......................... 529 266 149
344.2
Food business ................................................ 654 – – 309.8
41.7

Net sales ..................................................... ¥309,789 ¥344,171 ¥418,561 18.9

Notes: 1. Products supplied to franchise stores represent sales of merchandise to franchises. 229.0
2. Administrative charges are royalty income received from franchises. 0
3. Fees from in-store alterations comprise income from fitting and mending, such as hemming. –19.7
4. The above figures do not include consumption tax.
– 28.6
111.1

FY ’99 ’00 ’01 ’02 ’03 FY ’99 ’00 ’01 ’02 ’03

22
advertising and promotion at a time when sales were trending downward would likely The Company recorded extraordinary losses of ¥6.8 billion, mainly due to costs
have led to a steeper decline in sales. Rents increased ¥2.2 billion, to ¥23.9 billion, associated with the downsizing of our U.K. store network of ¥4.7 billion, which
mainly due to costs associated with new store openings and the enlargement of included losses on closure of stores and payment of severance benefits.
existing stores, which were undertaken as part of our scrap-and-build activities. As a result of the abovementioned, net income was down 24.8%, to ¥20.9 billion,
or 6.8% of net sales. However, this figure was above our initial estimate of ¥20.2
Breakdown of SG&A expenses billion. ROA was 9.7% and ROE was 15.9%.
2003 2002 2001
Millions % of % Millions % of % Millions % of % LIQUIDITY AND FINANCIAL CONDITION
of yen sales change of yen sales change of yen sales change
Assets, Liabilities, and Shareholders’ Equity
Personnel ............ ¥34,103 11.0% –6.4% ¥36,452 10.6% –3.8% ¥37,891 9.1% +79.3%
In the consolidated balance sheets, total assets were up ¥8.9 billion at the end
Advertising and
promotion cost ... 19,276 6.2 –2.0 19,670 5.7 +3.1 19,083 4.6 +90.2
of fiscal 2003. Current assets and fixed assets both increased, while liabilities
Rents .................. 23,943 7.8 +10.1 21,754 6.3 +21.7 17,872 4.3 +72.7
decreased due to debt repayment. As a result, retained earnings and shareholders’
Depreciation and equity grew. On the assets side, particularly noteworthy were a rise in cash and a
amortization ....... 2,272 0.7 +17.7 1,931 0.6 +22.9 1,571 0.4 +95.0 reduction in inventories.
Others ................. 16,160 5.2 –19.9 20,180 5.9 –5.4 21,324 5.0 +123.3 Total current assets increased ¥3.9 billion, to ¥170.5 billion. Cash and marketable
Total.................... ¥95,757 30.9% –4.2% ¥99,987 29.1% +2.3% ¥97,741 23.4% +88.4% securities amounted to ¥123.7 billion, up ¥16.5 billion from the previous year-end.
This improvement was largely due to net cash provided by operating activities of
Operating Income and Net Income ¥35.8 billion. Despite a net increase of 35 stores at fiscal year-end, inventories
Operating income decreased 18.1%, to ¥41.3 billion, or 13.3% of net sales. decreased ¥10.1 billion from the previous year-end, to ¥20.9 billion. Based on our
However, operating income exceeded our initial estimates of ¥37.3 billion. Moreover, policy of trying to sell all products by the end of each retail season, not only did we
operating income was up 50.5% year on year in the second half. rapidly dispose of inventories carried over from the previous fiscal year, we sold out
all of fiscal 2003 products before the end of their respective retail seasons. Total
current liabilities declined ¥4.1 billion from the previous year-end, to ¥78.5 billion.

Year-on-Year Monthly Trends

at Existing Stores in FY03 Gross Profit Margin Net Income and
(UNIQLO Stores in Japan) for Fiscal Half Years Net Income per Share ROA and ROE
(%) (%) 49.0 (Billions of yen) 59.2 (Yen) (%)
9.6 70.2
1,303.35
6.7 65.3
1.6 1.0 1.8
1,119.28
0 –2. 7
–3.1 46.4
–6.3
45.8
–7.6 –8.7 –5.8 34.5
–9.1
–10.1 –10.3 –9.3 –8.0 –8.7
–12.5 –9.1 –9.6 44.3
–11.0 27.9
–15.7 –12.2 –14.9 30.4 29.1
–13.5
–20.2 –17.8 –17.3 –17.4
20.9 22.9 23.2
–19.3
–24.3 –20.8 42.9 42.9 15.9
259.51 269.54 11.2 12.1
–28.5 –25.8 203.05
6.8
–30.7 –30.0 9.7
Sep. Oct. Nov. Dec. Jan. Feb. Mar. Apr. May. Jan. Jul. Aug. FY ’01/1st ’01/2nd ’02/1st ’02/2nd ’03/1st ’03/2nd FY ’99 ’00 ’01 ’02 ’03 FY ’99 ’00 ’01 ’02 ’03
Sales Customer Numbers Net Income Net Income per Share ROE ROA
Sales per Customer
23
 This decrease was primarily due to the repayment of ¥1.8 billion in short-term debt DIVIDEND POLICY
and a ¥4.9 billion reduction in accounts payable, to ¥43.2 billion, which reflected We paid a dividend of ¥35.00 per share for the second half of the year ended August
lower sales. As a result, the current ratio was 217.2%. 31, 2003, for a full-year dividend of ¥55.00 per share. The consolidated payout ratio
Fixed assets rose ¥5.0 billion, to ¥49.3 billion. The Company accounted for a ¥2.0 was 26.7%. In the current fiscal year, ending August 31, 2004, we anticipate a
billion increase in buildings and structures, lease deposits, and construction assistance dividend payout of ¥100.00 per share and a payout ratio of 30.9%. Looking ahead,
fund receivables from the previous year-end, to ¥40.8 billion, which was associated we will seek to achieve an equal allocation of annual earnings to maintain sufficient
with the opening of 88 new stores. Meanwhile, the repayment of ¥4.0 billion of long- internal funds for sustained growth; to invest aggressively in related new businesses,
term debt resulted in a ¥3.9 billion reduction in long-term liabilities, to ¥0.8 billion. including M&A; and to return profits to shareholders through higher dividends.
Total shareholders’ equity was up ¥16.9 billion, to ¥140.5 billion, and the
shareholders’ equity ratio rose from 58.6% at the end of the previous fiscal year, OUTLOOK
to 63.9%. In the current fiscal year, ending August 31, 2004, FAST RETAILING expects to post
its first full-year increases in revenues and earnings for three years. We anticipate
Cash Flows consolidated net sales of ¥335.2 billion, operating income of ¥59.0 billion, and net
Net cash provided by operating activities totaled ¥35.8 billion, mainly attributable to income of ¥32.9 billion. Separate performance forecasts for the parent company and
income before income taxes of ¥34.8 billion, which more than compensated for its subsidiaries for fiscal 2004 are as follows.
income taxes paid of ¥10.1 billion. We estimate that the parent company, which is responsible for UNIQLO
Net cash provided by operating activities offset net cash used in investing activities of operations in Japan, will achieve growth in revenues and earnings, with net sales
¥10.1 billion, which was primarily related to new store openings and other investments, of ¥330.0 billion, operating income of ¥59.6 billion, and net income of ¥33.6 billion.
and ¥10.2 billion net cash used in financing activities, which was associated with We expect to achieve this growth by increasing existing store sales 1.1% and by
repayments of ¥6.0 billion and dividends paid of ¥4.1 billion. expanding our store network. In our scrap-and-build program, we plan to open 90
Consequently, cash and cash equivalents at end of year rose ¥16.5 billion, to stores and close 40, for a net increase of 50 stores. As well as revenue growth, we
¥123.7 billion. expect the gross profit margin to continue its second-half recovery and improve to
46.1%.

Total Assets and Shareholders’ Equity and

Cash and Cash Equivalents Inventories Equity Ratio Dividend Payout Ratio
(Billions of yen) 249.8 (Billions of yen) 30.4 31.0 (Billions of yen) (%) 26.7
140.5
219.9
210.9 123.6 63.9
116.5 58.6 20.1
20.6 20.9
151.6 157.4 45.7 46.6
42.7
123.7
107.3 64.8 11.5
99.7 10.5 10.7
10.0
73.6
33.6
39.8

FY ’99 ’00 ’01 ’02 ’03 FY ’99 ’00 ’01 ’02 ’03 FY ’99 ’00 ’01 ’02 ’03 FY ’99 ’00 ’01 ’02 ’03
Total Assets Cash and Cash Equivalents Shareholders’ Equity Equity Ratio
24
 FAST RETAILING has three consolidated subsidiaries: UNIQLO (U.K.) LTD., which Breakdown of consolidated outlook for fiscal 2004
has assumed control of U.K. operations from FAST RETAILING (U.K.) LTD.; FAST
UNIQLO business Food business
RETAILING (JIANGSU) APPAREL CO., LTD. (FRJS), which is responsible for Billions of yen Consolidated Japan U.K. China
operations in China; and FR FOODS CO., LTD., which undertakes food-related Net sales ............... ¥335.2 ¥330.0 ¥2.2 ¥1.0 ¥2.0
operations in Japan. And, in September 2003 an agreement was reached whereby Net income/loss .... 32.9 33.6 0.1 –0.2 –0.6
we will become a shareholder of Link International Co., Ltd. (Link), and make Link an Store openings
affiliate accounted for by the equity method. However, because details had not been (net increase) ....... 107 (49) 90 (50) 0 (–16) 3 (1) 14 (14)
finalized as of December 2003, the impact of making Link an affiliate has not been Stores at
allowed for in performance forecasts for fiscal 2004. In U.K. operations, we aim to fiscal year-end .... 657 631 5 6 15
realize a profit of ¥90 million in the current fiscal year by drastically reducing Note: The above figures are for direct-run stores only.

headquarters costs while focusing management resources on the five stores left after
downsizing the store network in June 2003. FRJS and FR FOODS are expected to Acquisition of Theory
record deficits in the current fiscal year, given that both subsidiaries are in their In September 2003, FAST RETAILING and Link agreed to jointly acquire an

second year of operation and continue to carry substantial cost burdens associated ownership interest in the U.S. company Theory LLC, maker of the well-known

with prior investment for store openings and advertising and promotion. We aim to apparel brand theory. One of the top brands targeting modern contemporary men

realize profitability in both of those operations in fiscal 2005. and women, theory enjoys annual combined sales of more than ¥20.0 billion in the
United States and Japan. We decided to acquire an ownership interest in Theory

Consolidated outlook for fiscal year ending August 31, 2004 because of its profitability and potential for growth. We will work with Link to develop
theory into a global brand. And, we will consider collaborating with Theory with a
Annual Year-on-year First Year-on-year Second Year-on-year
Billions of yen % change half % change half % change view to launching new brands. FAST RETAILING is also looking at the possibility of
Net sales ..................... ¥335.2 +8.2% ¥178.9 +8.2% ¥156.3 +8.2% using Theory’s local connections and expertise as a bridgehead into the U.S. market.
Gross profit ................. 154.5 +12.7 82.8 +16.6 71.7 +8.5 FAST RETAILING invested ¥6.7 billion in Link and became a 47.1% shareholder. In
SG&A expenses .......... 95.5 –0.3 47.5 –0.7 48.0 +0.1 addition, Link and FAST RETAILING provided Theory with a joint debt guarantee of
Operating income ........ 59.0 +42.8 35.3 +52.2 23.7 +30.8 $99 million.
Net income.................. 32.9 +57.3 19.7 +65.5 13.3 +46.5
Store openings
(net increase) .............. 107 (49) 47 (13) 60 (36)

Nonconsolidated outlook for fiscal year ending August 31, 2004

Annual Year-on-year First Year-on-year Second Year-on-year
Billions of yen % change half % change half % change

Net sales ..................... ¥330.0 +9.4% ¥176.5 +9.0% ¥153.5 +9.8%

Gross profit ................. 152.4 +13.1 81.8 +16.9 70.6 +9.0
SG&A expenses .......... 92.8 +5.1 46.1 +5.1 46.7 +5.2
Operating income ........ 59.6 +28.2 35.7 +36.7 23.9 +17.3
Net income.................. 33.6 +78.0 20.1 +78.0 13.5 +83.0
Store openings
(net increase) .............. 90 (50) 39 (21) 51 (29)

25
 Consolidated Balance Sheets
FAST RETAILING CO., LTD. and consolidated subsidiaries
August 31, 2003 and 2002

Thousands of
Millions of yen U.S. dollars (Note 2)
ASSETS 2003 2002 2003
Current assets:
Cash (Note 3) .................................................................................................................................. ¥ 76,447 ¥ 67,772 $ 652,557
Marketable securities (Notes 3 and 4) .............................................................................................. 47,286 39,491 403,636
Trade notes and accounts receivable .............................................................................................. 4,277 3,143 36,509
Less—Allowance for doubtful accounts ........................................................................................... (3) (5) (26)
Net trade receivables ................................................................................................................. 4,274 3,138 36,483
Inventories (Note 5) .......................................................................................................................... 20,867 30,995 178,122
Deferred tax assets (Note 6) ............................................................................................................ 4,365 294 37,260
Forward exchange contracts ........................................................................................................... 13,863 19,229 118,335
Other ............................................................................................................................................... 3,435 5,678 29,322
Total current assets .............................................................................................................. 170,537 166,597 1,455,715

Property and equipment:

Land ................................................................................................................................................ 2,052 2,052 17,516
Buildings and structures .................................................................................................................. 19,011 18,916 162,279
Furniture and equipment .................................................................................................................. 300 390 2,561
Construction in progress ................................................................................................................. 255 317 2,177
21,618 21,675 184,533
Less—Accumulated depreciation .................................................................................................... (6,898) (5,765) (58,882)
Net property and equipment ...................................................................................................... 14,720 15,910 125,651

Intangible assets ................................................................................................................................. 3,352 784 28,613

Investments and other assets:

Investments in securities (Note 4) ..................................................................................................... 584 64 4,985
Investments in subsidiaries and affiliates .......................................................................................... 876 1,332 7,478
Lease deposits ................................................................................................................................. 12,114 11,156 103,406
Construction assistance fund receivables (Note 14) ......................................................................... 16,402 14,310 140,008
Deferred tax assets (Note 6) ............................................................................................................ 128 139 1,093
Other ................................................................................................................................................ 1,142 630 9,748
Total investments and other assets ............................................................................................ 31,246 27,631 266,718
Total assets .......................................................................................................................... ¥219,855 ¥210,922 $1,876,697
See accompanying notes to consolidated financial statements.

26
 Thousands of
Millions of yen U.S. dollars (Note 2)
LIABILITIES AND SHAREHOLDERS’ EQUITY 2003 2002 2003
Current liabilities:
Short-term debt (Note 7) ................................................................................................................. ¥ — ¥ 1,809 $ —
Accounts payable ............................................................................................................................ 43,236 48,146 369,065
Accrued income taxes (Note 6) ........................................................................................................ 7,750 — 66,155
Net deferred unrealized gain on forward exchange contracts ........................................................... 13,862 19,229 118,327
Other ............................................................................................................................................... 13,682 13,403 116,791
Total current liabilities ................................................................................................................. 78,530 82,587 670,338

Long-term liabilities:
Long-term debts (Note 8) ................................................................................................................ — 4,000 —
Other ............................................................................................................................................... 820 703 7,000
Total long-term liabilities ............................................................................................................. 820 4,703 7,000
Total liabilities ............................................................................................................................. 79,350 87,290 677,338

Shareholders’ equity:
Capital (Note 10) .............................................................................................................................. 3,274 3,274 27,947
Additional paid-in capital (Note 10) .................................................................................................. 11,579 11,579 98,839
Retained earnings (Note 11) ............................................................................................................ 141,406 124,686 1,207,051
Net unrealized holding gain on securities ......................................................................................... 181 181 1,545
Foreign currency translation adjustments ......................................................................................... 92 (67) 785
Treasury stock, at cost (Note 12) ..................................................................................................... (16,027) (16,021) (136,808)
Total shareholders’ equity .................................................................................................... 140,505 123,632 1,199,359

Commitments and contingencies (Note 14)

Total liabilities and shareholders’ equity ................................................................................ ¥219,855 ¥210,922 $1,876,697

27
 Consolidated Statements of Income
FAST RETAILING CO., LTD. and consolidated subsidiaries
For the Years Ended August 31, 2003, 2002 and 2001

Thousands of
Millions of yen U.S. dollars (Note 2)
2003 2002 2001 2003
Net sales ......................................................................................................................... ¥309,789 ¥344,171 ¥418,561 $2,644,379
Cost of sales ................................................................................................................... 172,724 193,766 218,739 1,474,383
Gross profit ................................................................................................................. 137,065 150,405 199,822 1,169,996

Selling, general and administrative expenses (Notes 9 and 15) .................................... 95,757 99,987 97,741 817,388
Operating income ........................................................................................................ 41,308 50,418 102,081 352,608

Other income (expenses):

Interest and dividend income ...................................................................................... 374 677 1,062 3,192
Foreign currency exchange gain .................................................................................. 142 353 — 1,212
Interest expenses (Notes 7 and 8) ............................................................................... (332) (407) (137) (2,834)
Loss on closure of stores ............................................................................................ (178) (65) (52) (1,519)
Loss on disposal of fixed assets .................................................................................. (627) (709) (75) (5,352)
Loss on termination of leases ...................................................................................... (1,288) — (439) (10,995)
Loss on liquidation of subsidiary .................................................................................. (4,665) — — (39,821)
Other, net (Note 9) ...................................................................................................... 17 179 93 145
(6,557) 28 452 (55,972)
Income before income taxes .................................................................................. 34,751 50,446 102,533 296,636

Income taxes (Note 6):

Current ........................................................................................................................ 17,873 19,878 44,151 152,565
Deferred ...................................................................................................................... (4,055) 2,717 (810) (34,614)
13,818 22,595 43,341 117,951
Net income ............................................................................................................ ¥ 20,933 ¥ 27,851 ¥ 59,192 $ 178,685

Yen U.S. dollars (Note 2)

2003 2002 2001 2003
Primary net income per share ........................................................................................... ¥203.05 ¥269.54 ¥1,119.28 $1.73
Diluted net income per share ............................................................................................ — — — —
See accompanying notes to consolidated financial statements.

28
Consolidated Statements of Shareholders’ Equity
FAST RETAILING CO., LTD. and consolidated subsidiaries
For the Years Ended August 31, 2003, 2002 and 2001

Millions of yen
Net unrealized Foreign currency
Additional Retained holding gain translation Treasury
Capital paid-in capital earnings on securities adjustments stock, at cost Total
Balance at August 31, 2000 .............................................. ¥3,274 ¥11,579 ¥ 51,556 ¥ — ¥ — ¥ (1,654) ¥ 64,755
Cumulative effect of changes in accounting principle ..... — — 700 — — 700
Net income .................................................................... — — 59,192 — — — 59,192
Cash dividends (Note 11) ............................................... — — (5,818) — — — (5,818)
Directors’ bonuses (Note11) .......................................... — — (360) — — — (360)
Net change during the year ............................................ — — — — — —
Increase in treasury stock (Note 12) ............................... — — — — — (1,993) (1,993)
Balance at August 31, 2001 .............................................. 3,274 11,579 104,570 700 — (3,647) 116,476
Effect of newly consolidated subsidiary .......................... — — (354) — — — (354)
Net income .................................................................... — — 27,851 — — — 27,851
Cash dividends (Note 11) ............................................... — — (6,732) — — — (6,732)
Directors’ bonuses (Note 11) ......................................... — — (649) — — — (649)
Net change during the year ............................................ — — — (519) (67) — (586)
Increase in treasury stock (Note 12) ............................... — — — — — (12,374) (12,374)
Balance at August 31, 2002 .............................................. 3,274 11,579 124,686 181 (67) (16,021) 123,632
Net income .................................................................... — — 20,933 — — — 20,933
Cash dividends (Note 11) ............................................... — — (4,068) — — — (4,068)
Directors’ bonuses (Note 11) ......................................... — — (145) — — — (145)
Net change during the year ............................................ — — — — 159 — 159
Increase in treasury stock (Note 12) ............................... — — — — — (6) (6)
Balance at August 31, 2003 .............................................. ¥3,274 ¥11,579 ¥141,406 ¥181 ¥92 ¥(16,027) ¥140,505

Thousands of U.S. dollars (Note 2)

Net unrealized Foreign currency
Additional Retained holding gain translation Treasury
Capital paid-in capital earnings on securities adjustments stock, at cost Total
Balance at August 31, 2002 ....................................... $27,947 $98,839 $1,064,329 $1,545 $(572) $(136,757) $1,055,331
Net income ............................................................. — — 178,685 — — — 178,685
Cash dividends (Note 11) ........................................ — — (34,725) — — — (34,725)
Directors’ bonuses (Note 11) ................................... — — (1,238) — — — (1,238)
Net change during the year ..................................... — — 1,357 — 1,357
Increase in treasury stock (Note 12) ......................... — — — — — (51) (51)
Balance at August 31, 2003 ....................................... $27,947 $98,839 $1,207,051 $1,545 $785 $(136,808) $1,199,359
See accompanying notes to consolidated financial statements.

29
 Consolidated Statements of Cash Flows
FAST RETAILING CO., LTD. and consolidated subsidiaries
For the Years Ended August 31, 2003, 2002 and 2001

Thousands of
Millions of yen U.S. dollars (Note 2)
2003 2002 2001 2003
Cash flows from operating activities:
Income before income taxes ........................................................................................................ ¥ 34,751 ¥ 50,446 ¥102,533 $ 296,636
Adjustments to reconcile income before income taxes to net cash
provided by (used in) operating activities:
Depreciation and amortization ............................................................................................... 2,364 1,942 1,571 20,179
Decrease in allowance for doubtful accounts ......................................................................... (5) (3) (21) (43)
Increase (decrease) in accrued pension liability ...................................................................... – (106) 106 —
Interest and dividend income ................................................................................................. (374) (677) (1,062) (3,192)
Interest expenses .................................................................................................................. 332 407 137 2,834
Foreign currency exchange gain ............................................................................................ (28) (95) (87) (239)
Write-down of investment securities ...................................................................................... — — 85 —
Loss on liquidation of subsidiary ............................................................................................ 2,437 — — 20,802
Loss on disposal of fixed assets ............................................................................................ 626 709 75 5,344
(Increase) decrease in trade receivables ................................................................................ (1,179) 541 (1,862) (10,064)
(Increase) decrease in inventories .......................................................................................... 10,262 (647) (9,770) 87,597
(Increase) decrease in other assets ........................................................................................ 469 (2,312) (512) 4,004
Increase (decrease) in trade payables .................................................................................... (4,871) (15,367) 20,699 (41,579)
Increase (decrease) in accrued expenses and other liabilities ................................................. (477) (1,733) 4,777 (4,072)
Bonuses to directors ............................................................................................................. (145) (649) (360) (1,238)
Other ..................................................................................................................................... 10 — — 86
44,172 32,456 116,309 377,055
Interest and dividend received ..................................................................................................... 374 677 1,062 3,193
Interest paid ................................................................................................................................. (350) (421) (139) (2,988)
Income taxes paid ....................................................................................................................... (10,124) (52,073) (36,651) (86,419)
Refund of income taxes ............................................................................................................... 1,696 — — 14,477
Net cash provided by (used in) operating activities ................................................................. 35,768 (19,361) 80,581 305,318

Cash flows from investing activities:

Purchase of investment securities ................................................................................................ (299) — (865) (2,552)
Purchase of property and equipment ........................................................................................... (3,574) (5,151) (6,456) (30,508)
Proceeds from sale of property and equipment ........................................................................... 13 — — 111
Payments for lease deposits ........................................................................................................ (1,596) (2,291) (3,024) (13,624)
Collections of lease deposits ........................................................................................................ 642 633 220 5,480
Payments for construction assistance fund receivables ................................................................ (3,816) (2,938) (3,993) (32,574)
Collections of construction assistance fund receivables ............................................................... 1,724 1,505 840 14,716
Purchase of intangible fixed assets .............................................................................................. (2,645) (640) (14) (22,578)
Investments in subsidiaries .......................................................................................................... (758) (1,215) — (6,470)
Other, net .................................................................................................................................... 191 170 93 1,631
Net cash used in investing activities ....................................................................................... (10,118) (9,927) (13,199) (86,368)

Cash flows from financing activities:

Net increase (decrease) in short-term debt .................................................................................. (1,955) 1,809 — (16,688)
Repayments of long-term debt .................................................................................................... (4,000) (3,000) (3,000) (34,144)
Purchase of treasury stock .......................................................................................................... (6) (12,365) (2,251) (52)
Proceeds from sale of treasury stock ........................................................................................... — 258 —
Dividends paid ............................................................................................................................. (4,074) (6,732) (5,818) (34,776)
Other ........................................................................................................................................... (144) (143) (144) (1,229)
Net cash used in financing activities ...................................................................................... (10,179) (20,431) (10,955) (86,889)
Effect of exchange rate changes on cash and cash equivalents .................................................. (73) (867) 1,282 (623)
Net change in cash and cash equivalents ...................................................................................... 15,398 (50,586) 57,709 131,438
Cash and cash equivalents at beginning of year (Note 3) ............................................................. 107,263 157,379 99,670 915,604
Cash and cash equivalents of newly consolidated subsidiaries ................................................... 1,072 470 — 9,151
Cash and cash equivalents at end of year (Note 3) ........................................................................ ¥123,733 ¥107,263 ¥157,379 $1,056,193
See accompanying notes to consolidated financial statements.

30
Notes to Consolidated Financial Statements
FAST RETAILING CO., LTD. and consolidated subsidiaries

1 BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (c) Cash and Cash Equivalents
For the purpose of the cash flows, the Company considers all highly liquid
(a) Basis of Presentation investments with insignificant risk of changes in value, with maturities of
The accompanying consolidated financial statements have been prepared from generally three months or less when purchased, to be cash equivalents.
the accounts maintained by Fast Retailing Co., Ltd. (“the Company”) in accordance
with the provisions set forth in the Japanese Commercial Code and in conformity (d) Short-term Investments and Investments in Securities
with accounting principles and practices generally accepted in Japan, and its Securities are to be classified into one of the following three categories and
foreign subsidiaries in conformity with those of the countries of their domicile. accounted for as follows:
These may differ in some material respects from accounting principles and • Securities that the Company held with the objective of generating profits on
practices generally accepted in countries and jurisdictions other than Japan. short-term differences in price are classified as trading securities and measured
The consolidated financial statements, including the notes to the consolidated at fair value, with unrealized holding gains and losses included in earnings.
financial statements, presented herein have been compiled from the consolidated • Securities that the Company has the positive intent and ability to hold to
financial statements filed with the Ministry of Finance as required by the Security maturity are classified as held-to-maturity securities and measured at
and Exchange Law of Japan (“the MOF Report”), and certain reclassifications amortized cost.
have been made in the MOF Report and additional information which is not • Securities classified as neither trading securities nor held-to-maturity securities
required under accounting principles generally accepted in Japan is included for are classified as available-for-sale securities and measured at fair value, with
the convenience of readers outside Japan. either unrealized holding gains and losses excluded from earnings and reported
as net unrecognized holding gain or loss in a separate component of shareholders’
(b) Basis of Consolidation equity until realized, or with unrealized holding losses included in earnings and
The consolidated financial statements include the accounts of the Company and unrealized gains excluded from earnings and reported as unrecognized
the following subsidiaries. holding gains in a separate component of shareholders’ equity until realized.
The Company measured available-for-sale securities at fair value and reported
Ownership
Company percentage
unrealized holding gains and losses as “Net unrealized holding gain or loss on
Fast Retailing (U.K.) Ltd. 100% securities” in a separate component of shareholders’ equity. Available-for-sale
FR Foods Co., Ltd. 100% securities without fair values are carried at cost. In computing realized gain or
Fast Retailing (Jiangsu) Apparel Co., Ltd. 83%
loss, cost of available-for-sale securities was principally determined by the
FR Foods Co., Ltd. began its operations in November 2002, and its accounts moving-average method.
have been included in the accompanying consolidated financial statements
since then. (e) Inventories
Fast Retailing (Jiangsu) Apparel Co., Ltd. began its operations in September Inventories are stated at cost, cost being determined by the specific
2002 in the People’s Republic of China. The accompanying consolidated identification method.
financial statements include accounts of its sales division, as the Company is
entitled to profit and loss attributable to the sales operations for which the Company (f) Property, Plant and Equipment
has responsibility pursuant to the joint venture contract entered into between the Property and equipment is stated at cost. Depreciation is computed by the
Company and Jiangsu Chenfeng Group Co., Ltd., a joint venture partner. declining-balance method for the Company and its domestic subsidiaries and
All the significant intercompany accounts and transactions have been principally by the straight-line method for overseas subsidiaries over the
eliminated in consolidation. following estimated useful lives of the respective assets.
Buildings and structures 10 to 50 years
Furniture and equipment 5 to 8 years
31
 (g) Leases above, translated at related contract rates. Gains or losses resulting from the
Under Japanese “Accounting Standards for Leases”, a finance lease that translation of foreign currencies, including gains and losses on settlement, are
transfers ownership of the property to the lessee by the end of the lease term credited or charged to income as incurred.
shall be classified as a capital lease and shall be recorded as an asset and an The financial statements of the consolidated foreign subsidiaries are
obligation, and other than such finance lease is permitted to be classified as an translated into the reporting currency of yen as follows: all assets and liabilities
operating lease. The Company classified all other finance leases as operating are translated at the rates of exchange in effect at the balance sheet date;
leases, and lease expense is charged to expense over the lease term as it shareholders’ equity accounts are translated at historical rates; income and
becomes payable. expenses are translated at the rates of exchange in effect at the balance sheet
date; and a comprehensive adjustment resulting from translation of assets,
(h) Income Taxes liabilities and shareholders’ equity is reported as “Foreign currency translation
Deferred income taxes are accounted for under the asset and liability method in adjustments”, a separate component of shareholders’ equity.
accordance with “Accounting Standards for Deferred Income Taxes” issued by
the Business Accounting Deliberation Council. Under the asset and liability (l) Derivative Financial Instruments
method of the standard, deferred tax assets and liabilities are recognized for the In principle, net assets and liabilities arising from derivative financial transactions
expected future tax consequences attributable to differences between the are measured at fair value, with unrealized gain or loss included in earnings.
financial statement carrying amount of existing assets and liabilities and their Hedging transactions that meet the criteria of hedge accounting as regulated in
respective tax bases. Deferred tax assets and liabilities are measured using “Accounting Standards for Financial Instruments” are accounted for using
enacted tax rates expected to apply to taxable income in the years in which deferral hedge accounting, which requires the unrealized gains or losses to be
those temporary differences are expected to be recovered or settled. deferred as a liability or asset until gains or losses relating to the hedge are
recognized.
(i) Retirement and Severance Benefits
Retirement and severance benefits for employees are provided based on the (m) Net Income Per Share
projected benefit obligation and the pension assets. Effective September 1, 2002, the Company adopted “Earnings Per Share”
issued by the Accounting Standards Board of Japan (ASBJ). Under this
(j) Revenue Recognition standard, net income per share is based on the weighted average number of
The Company recognizes sales revenue upon sale of merchandise to customers shares of common stock outstanding during the respective years. On a diluted
where title of the merchandise transfers to the customers. basis, both net income and shares outstanding are adjusted assuming exercise
of rights relevant to potential shares. If the Company computed the net income
(k) Foreign Currency Translation per share in accordance with the standards prior to the adoption of the afore-
Foreign currency transactions are translated into yen on the basis of the rates mentioned “Earnings Per Share”, net income per share for the fiscal year ended
in effect at the transaction date or, if only the relation between foreign currency August 31, 2003 would be ¥205.80.
transactions and related firm forward exchange contracts meets the criteria of
hedge accounting as regulated in “Accounting Standards for Financial
Instruments”, those covered by firm forward exchange contracts can be
translated at such contract rates. At year-end, monetary assets and liabilities
denominated in foreign currencies are translated into yen at the rates of
exchange in effect at the balance sheet date, except for those, as described

32
 2 BASIS OF FINANCIAL STATEMENT TRANSLATION 5 INVENTORIES

The accompanying consolidated financial statements are expressed in yen and, Inventories as of August 31, 2003 and 2002 are summarized as follows:
solely for the convenience of the reader, have been translated into the United Thousands of
Millions of yen U.S. dollars
States (U.S.) dollars at the rate of ¥117.15=$1, the approximate exchange rate 2003 2002 2003
prevailing on the Tokyo Foreign Exchange Market as of August 31, 2003. This Merchandise .......................................................... ¥20,511 ¥30,699 $175,083
Supplies ................................................................ 356 296 3,039
translation should not be construed as a presentation that any amounts shown
¥20,867 ¥30,995 $178,122
could be converted into U.S. dollars.

6 INCOME TAXES
3 CASH AND CASH EQUIVALENTS
The Company and subsidiaries are subject to a number of taxes based on
Cash and cash equivalents as of August 31, 2003 and 2002 consist of the
income. The aggregate normal tax rate for the Company was approximately
following:
41.8% for the years ended 2003, 2002 and 2001.
Thousands of
Millions of yen U.S. dollars Reconciliations between the normal income tax rate and the effective income
2003 2002 2003 tax rate as a percentage of income before income taxes are as follows:
Cash ...................................................................... ¥ 76,447 ¥ 67,772 $ 652,557
Marketable securities ............................................. 47,286 39,491 403,636 2003 2002 2003
Cash and cash equivalents .................................... ¥123,733 ¥107,263 $1,056,193 Normal income tax rate ......................................... 41.8% 41.8% 41.8%
Change in valuation allowance ............................... (1.8) 2.1 –
Other ...................................................................... (0.2) 0.9 0.5
4 SHORT-TERM INVESTMENTS AND INVESTMENTS IN SECURITIES Effective income tax rate......................................... 39.8% 44.8% 42.3%

The tax effects of temporary differences that give rise to significant portions of
Investments in securities as of August 31, 2003 and 2002 are classified as the deferred tax assets and liabilities as of August 31, 2003 and 2002 are
available-for-sale securities. A summary of cost, unrealized holding gross gains, presented below:
unrealized holding gross losses and aggregate fair value by major type of securities Thousands of
is as follows: Millions of yen U.S. dollars
2003 2002 2003
Millions of yen
2003 2002 Total gross deferred tax assets:
Gross Gross Aggregate Gross Gross Aggregate Inventories .......................................................... ¥ – ¥ 233 $ –
Cost gains losses fair value Cost gains losses fair value Accrued business tax ......................................... 645 – 5,506
Available-for-sale Accrued bonus ................................................... 800 291 6,829
securities: Accrued loss on liquidation of subsidiary............. 2,863 – 24,438
Equity securities ... ¥ 362 ¥228 ¥(6) ¥584 ¥ 63 ¥7 ¥(6) ¥ 64 Operating loss carryforward ................................ 567 1,199 4,840
Mutual funds ...... 37,786 – – 37,786 39,491 – – 39,491 Other .................................................................. 317 217 2,706
Others ................ 9,448 72 (21) 9,499 – – – – 5,192 1,940 44,319
¥47,596 ¥300 ¥(27) ¥47,869 ¥39,554 ¥7 ¥(6) ¥39,555 Valuation allowance ................................................ (576) (1,199) (4,916)
4,616 741 39,403
Thousands of U.S. dollars
2003 Total gross deferred tax liabilities:
Gross Gross Aggregate Refundable business tax..................................... – (178) –
Cost gains losses fair value Net unrealized holding gain on securities ............ (123) (130) (1,050)
Available-for-sale (123) (308) (1,050)
securities: Net deferred tax assets........................................... ¥4,493 ¥ 433 $38,353
Equity securities ....... $ 3,090 $1,946 $(51) $ 4,985
Mutual funds ............ 322,544 – – 322,544
Others ...................... 80,649 614 (179) 81,084
$406,283 $2,560 $(230) $408,613
33
 Net deferred tax assets as of August 31, 2003 and 2002 are reflected in the Net periodic benefit cost for the defined benefit pension plan is as follows:
consolidated balance sheets under the following captions: Thousands of
Millions of yen U.S. dollars
Thousands of 2003 2002 2001 2003
Millions of yen U.S. dollars
2003 2002 2003 Service cost ...................................... ¥– ¥126 ¥ 98 $–
Deferred tax assets — current ............................... ¥4,365 ¥294 $37,260 Interest cost ...................................... – 15 11 –
Deferred tax assets — noncurrent ......................... 128 139 1,093 Expected return on plan assets ......... – (8) (6) –
Net deferred tax assets .......................................... ¥4,493 ¥433 $38,353 Amortization of transition obligation ... – – 58 –
Amortization of actuarial loss ............. – 58 35 –
The Company changed the effective tax rate utilized to calculate deferred tax Net periodic pension cost .............. ¥– ¥191 ¥196 $–
assets and liabilities that are expected to be realized after September 1, 2004 The entire transition difference of ¥58 million arising from the adoption of the
from 41.8% to 40.5%. The change was caused due to promulgation of the new accounting standard was amortized in the year ended August 31, 2001,
Local Tax Reform Act on March 31, 2003. The change in the effective tax rate and amortized cost was included in “Other income (expenses)–Other”.
does not have a material impact on deferred tax assets and net income for the Actuarial assumptions used to determine costs and projected benefit
fiscal year ended August 31, 2003. obligations are principally as follows:
2003 2002 2001
7 SHORT-TERM DEBT Discount rate ................................................... – 3.0% 3.0%
Expected rate of return on plan assets ............ – 2.0% 2.0%

Unsecured bank borrowing as of August 31, 2002 amounted to ¥1,809 million.

The weighted average interest rate on short-term debt outstanding as of 10 COMMON STOCK
August 31, 2002 was 4.29%. The borrowing was repaid during the year ended
August 31, 2003. The Japanese Commercial Code (JCC) had required that at least 50% of the
issue price of new shares, with minimum of the par value thereof, were
designated as stated capital. Proceeds in excess of the amount designated as
8 LONG-TERM DEBTS
stated capital are credited to additional paid-in capital.
Long-term debts are summarized as follows: Effective October 1, 2001, the JCC was amended to eliminate the provision of
Thousands of common stock par value resulting in all common stock being recorded with no
Millions of yen U.S. dollars par value. Under the amended JCC, at least 50% of the issue price of new
2003 2002 2003
Unsecured loans from Japanese banks shares is designated as stated capital, and proceeds in excess of the amount
1.88% to 1.95% interest, due 2003 ..................... ¥– ¥4,000 $– designated as stated capital are credited to additional paid-in capital.
The Company has authorized for issuance of 300 million shares of common stock
9 RETIREMENT AND SEVERANCE BENEFITS with no par value as of August 31, 2003. Issued and outstanding shares and change
in shares for the years ended August 31, 2003, 2002 and 2001 are summarized
The Company had a defined benefit pension plan (tax qualified pension plan) as follows:
to provide retirement and severance benefits to substantially all employees. Issued and
outstanding shares
At August 31, 2002, the Company terminated a defined benefit pension plan
Balance as of August 31, 2000 ...................................................... 26,518,414
through providing a defined contribution plan. Defined benefits were not Issued upon stock split .............................................................. 26,518,414
provided under the successor plan. Balance as of August 31, 2001 ...................................................... 53,036,828
Issued upon stock split .............................................................. 53,036,828
Balance as of August 31, 2002 ...................................................... 106,073,656
Balance as of August 31, 2003 ...................................................... 106,073,656

34
11 LEGAL RESERVE AND DIVIDENDS The changes in shares of treasury stock for the years ended August 31, 2003,
2002 and 2001 are summarized as follows:
The JCC had provided that an amount equal to at least 10% of appropriations Thousands of
Shares Millions of yen U.S. dollars
of retained earnings to be paid in cash, such as cash dividends and directors’
Balance as of August 31, 2000 ........................... 48,200 ¥ 1,654 $ 0
bonuses, be appropriated as a legal reserve until such reserve equals 25% of Repurchase of common stock ........................ 88,200 2,169
stated capital. The legal reserve is not available for dividends but may be used Treasury stock issued ..................................... (8,800) (176)
Two-for-one common stock split ..................... 48,200 –
to reduce a capital deficit by resolution of the shareholders’ meeting or may be Balance as of August 31, 2001 ........................... 175,800 3,647
transferred to capital by resolution of the Board of Directors. Repurchase of common stock ........................ 2,002,479 12,374
Effective October 1, 2001, the JCC was amended to require an amount of Two-for-one common stock split ..................... 2,176,963 –
Balance as of August 31, 2002 ........................... 4,355,242 16,021 136,756
equal to at least 10% of appropriations of retained earnings to be paid in cash Repurchase of common stock ........................ 1,700 6 52
be appropriated as a legal reserve until the total of additional paid-in capital and Balance as of August 31, 2003 ........................... 4,536,942 ¥16,027 $136,808
legal reserve equals 25% of stated capital. In addition to reduction of a deficit
and transfer to stated capital, either additional paid-in capital or legal reserve 13 STOCK OPTION PLAN
may be available for dividends by resolution of the shareholders’ meeting to the
extent that the amount of total additional paid-in capital and legal reserve The shareholders’ meeting held on November 26, 1999 approved that the
exceeds 25% of stated capital. Company may purchase 50,600 shares of common stock within the period from
Cash dividends and appropriations to the legal reserve charged to retained November 26, 1999 to the closing of the next ordinary shareholders’ meeting
earnings during the years ended August 31, 2003, 2002 and 2001 represent with an aggregate purchase cost cap of ¥2,500 million for the stock option plan.
dividends and directors’ bonuses paid out during those periods and the related Certain officers and certain other employees may be granted options to
appropriations to the legal reserve. The accompanying consolidated financial purchase the common stock at an exercise price at the lower of 102.5% of the
statements do not include any provision for dividends of ¥35 ($0.30) per share, average purchase cost or market price at the grant date. An eligible person can
aggregating ¥3,560 million ($30,388 thousand), or related appropriations for exercise 50% of the granted options from November 27, 2001 to November 26,
directors’ bonuses amounting to ¥280 million ($2,390 thousand). These 2002 and can exercise 100% from November 27, 2002 to August 31, 2004.
dividends and appropriations were approved by shareholders at the annual In accordance with the shareholders’ approval, the Company purchased 48,200
shareholders’ meeting held on November 26, 2003 in respect of the fiscal year shares for ¥1,654 million in 2000.
ended August 31, 2003. The shareholders’ meeting held on November 28, 2000 approved that the
Company may purchase 88,500 shares of common stock within the period from
12 TREASURY STOCK November 28, 2000 to the closing of the next ordinary shareholders’ meeting
with an aggregate purchase cost cap of ¥4,000 million ($33,543 thousand) for
The JCC had imposed certain restrictions on acquisition and disposal of the stock option plan. Certain officers and certain other employees may be
treasury stock. granted options to purchase the common stock at an exercise price at the lower
Effective October 1, 2001, the JCC eliminated the provisions of these of 102.5% of the average purchase cost or market price at the grant date. An
restrictions and allowed repurchase of treasury stock to the extent of eligible person can exercise 100% of the granted options from November 29,
distributable funds appropriated by resolution of the shareholders’ meeting. 2002 to August 31, 2005. In accordance with the shareholders’ approval, the
In addition, the shareholders may request the Company to repurchase their Company purchased 88,100 shares for ¥2,169 million in 2001.
shares less than a trading unit (100 shares) upon request pursuant to the
provision of the JCC. The shares less than a trading unit cannot be publicly
traded and have not been given to exercise voting rights.

35
 At the shareholders’ meeting held on November 29, 2001, a stock option plan 16 FINANCIAL INSTRUMENTS
was approved. Under this plan, certain directors and certain employees may be
granted options to purchase common stock of 106,100 shares in total at an The Company is exposed to market risks arising from fluctuations in foreign
exercise price at the higher of 102.5% of the market price at the date of grant or currency exchange rates. The Company entered into forward exchange
the average market price of the preceding month. Those eligible can exercise contracts for the purpose of hedging these risk exposures. Forward exchange
the options when the market price exceeds 150% of the exercise price for at contracts are utilized to manage foreign currency exchange rate risk from
least 10 business days within the term of exercise, which is from November 30, receivables, payables and forecasted transactions which are denominated in
2003 to August 31, 2006. foreign currency.
The Company has no derivative financial instruments for trading purposes.
14 COMMITMENTS AND CONTINGENCIES In addition, the Company may be exposed to losses in the event of nonperformance
by counterparties to financial instruments, but it is not expected that any counter-
The Company has the following contingent liabilities as of August 31, 2003: parties will fail to meet their obligations, because most of the counterparties are
Thousands of authentic financial institutions. The Company has also developed hedging
Year ended August 31, 2003 Millions of yen U.S. dollars
Loan guarantees for: policies to control various aspects of derivative financial transactions including
Employees’ benefit society ................................................ ¥12 $102 authorization levels, transaction volumes and counterparty credit guidelines.
Franchise store.................................................................. 60 512

Construction assistance fund receivables represent an interest free loan 17 SUBSEQUENT EVENTS
granted to real estate owners to construct stores that will be leased by the
Company. At the Board of Directors’ meeting on September 9, 2003, the Company
The Company transferred the construction assistance fund receivables to decided to acquire, with Link International Co., Ltd. (Link), ownership interest in
a trust bank during 1999. This transfer contains a recourse provision that the the Theory Group, which owns and markets the apparel brand “theory” in the
Company has an obligation to repurchase the transferred construction United States of America. Also, the Company decided to acquire 47.1% of
assistance fund receivables if the landowner fails to repay. The total outstanding ownership interest in Link. Key provisions of the transaction are as follows:
transferred construction assistance fund receivables to a trust bank amounted Investee company Link International Co., Ltd.
to ¥1,406 million ($12,001 thousand) as of August 31, 2003. Acquisition cost ¥6,700 million
Ownership interest 47.1%
Planned closing date November 2003
15 LEASES
Lease payments relating to finance leases accounted for as operating leases for In connection with the above transaction, the Company has provided $99
the years ended August 31, 2003, 2002 and 2001 amounted to ¥4,941 million million of guarantee for Theory Holdings Inc., which was incorporated for the
($42,176 thousand), ¥3,866 million and ¥2,717 million, respectively. purpose of acquisition of ownership interest in the Theory Group in the United
Future minimum lease payments relating to finance leases accounted for as States of America.
operating leases as of August 31, 2003 are as follows:
Thousands of
Year ending August 31 Millions of yen U.S. dollars
2004 .................................................................................... ¥ 4,715 $ 40,248
2005 and thereafter .............................................................. 9,649 82,364
¥14,364 $122,612

36
Report of Independent Auditors

The Board of Directors and Shareholders

Fast Retailing Co., Ltd.

We have audited the accompanying consolidated balance sheets of Fast Retailing Co., Ltd. and consolidated
subsidiaries as of August 31, 2003 and 2002, and the related consolidated statements of income, shareholders’ equity
and cash flows for each of the three years in the period ended August 31, 2003, all expressed in yen. These financial
statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards, procedures and practices generally accepted and
applied in Japan. Those standards, procedures and practices require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated
financial position of Fast Retailing Co., Ltd. and consolidated subsidiaries as of August 31, 2003 and 2002, and the
consolidated results of their operations and their cash flows for each of the three years in the period ended August 31,
2003, in conformity with accounting principles and practices generally accepted in Japan.
The United States dollar amounts in the accompanying consolidated financial statements with respect to the year
ended August 31, 2003 are presented solely for convenience. Our audit also included the translation of yen amounts into
United States dollar amounts and, in our opinion, such translation has been made on the basis described in Note 2 to
the consolidated financial statements.

Tokyo, Japan
November 26, 2003

See Note 1 to the consolidated financial statements which explains the basis of preparation of the consolidated financial statements of Fast Retailing Co., Ltd.
and consolidated subsidiaries under accounting principles and practices generally accepted in Japan.

37
 Investor Information
(As of August 31, 2003)

Stock Information Adjusted Stock Price (Yen)

9,000 8,455

Number of shares authorized .............................................. 300,000,000

7,450
Number of issued and outstanding shares .......................... 106,073,656 7,210
6,750 6,600
Number of shareholders
6,410
(including holders of treasury stock) ................................... 9,590 6,000
5,675
4,980
5,225
5,000 4,490 4,370 4,460
4,270 4,120 3,980
3,940 3,910
3,550 3,460 3,580
Principal Shareholders 3,440 3,420 3,330 3,330
3,530
3,650
3,820
3,190 3,170 3,450 3,630
Number of Percentage of 3,000 2,905 3,150 2,960 2,930 2,890 3,210 3,020 3,260 3,290
2,850
shares total shares in issue 2,595 2,690
2,280 2,270 2,430 2,550
Tadashi Yanai .............................................. 28,297,284 26.68%
The Master Trust Bank of Japan, Ltd.
(Trust Account) ........................................... 5,895,500 5.56
0
Japan Trustee Services Bank, Ltd. 2001.9 10 11 12 2002.1 2 3 4 5 6 7 8 9 10 11 12 2003.1 2 3 4 5 6 7 8

(Trust Account) ........................................... 4,861,300 4.58

The Chase Manhattan Bank, N.A. London ... 4,783,540 4.51
Kazumi Yanai ............................................... 4,781,808 4.51
Trading Volume Shares (Thousands)
Koji Yanai ................................................... 4,780,600 4.51
30,000
29,201
Fight & Step Co., Ltd. .................................. 4,750,000 4.48
FAST RETAILING CO., LTD. ......................... 4,356,942 4.11
State Street Bank and Trust Company ......... 3,673,563 3.46
MASTERMIND Co., Ltd. ............................... 3,610,000 3.40
20,000

Shareholder Breakdown 12,195

9,873 10,047
Number of Number of shares Percentage of
10,000 8,545 8,750 8,865
shareholders (Thousands) total shares in issue 8,191 7,844 8,299
7,450 7,589
6,624 6,559 6,667 6,865
Individuals and others ................... 9,030 48,651 45.86% 4,971
5,990
4,282 4,592 4,499 4,023 4,034
3,888
Foreign investors .......................... 301 22,880 21.57
Other financial institutions ............. 90 22,239 20.97
Companies and corporations ........ 129 9,004 8.49 0
2001.9 10 11 12 2002.1 2 3 4 5 6 7 8 9 10 11 12 2003.1 2 3 4 5 6 7 8
Securities companies ................... 40 3,299 3.11 * A stock split on a two-for-one basis was carried out on April 19, 2002, for shareholders as of February 28, 2002.
Total ......................................... 9,590 106,073 100.00%

38
Corporate Information

Corporate Data (As of August 31, 2003) Board of Directors and Auditors
(As of November 30, 2003)
FAST RETAILING CO., LTD.
Tadashi Yanai
Head Office Chairman & Chief Executive Officer
717-1 Oaza Sayama, Yamaguchi City,
Yamaguchi 754-0894, Japan
Tokyo Office
Genichi Tamatsuka
Nissay Aroma Square, 37-1, Kamata 5-chome, President & Chief Operating Officer
Ota-ku, Tokyo 144-8721, Japan Tadashi Yanai Genichi Tamatsuka

Established Nobuo Domae

May 1, 1963 Managing Director & Chief Information Officer

Paid-in Capital
¥3,274 million Masatoshi Morita
Managing Director & Chief Financial Officer
Line of Business
Retail chain operator specializing in in-house designed
casual clothing for men, women, and children of all ages.
Akira Tanaka
Operates stores under the name of UNIQLO. Managing Director

Number of Full-Time Employees

(parent company only) Shuichi Nakajima
Nobuo Domae Masatoshi Morita
1,466 Director

Settlement Date
August 31 Naoki Otoma
Director
Annual Shareholders’ Meeting
End of November
Makoto Hayashi
Transfer Agent Director (FAST RETAILING (JIANGSU) APPAREL
The Mitsubishi Trust & Banking Corp. CO., LTD., CEO)
1-4-5, Marunouchi, Chiyoda-ku,
Tokyo 100-0005, Japan
Toshiharu Ura
Number of Shares per Trading Unit
Standing Corporate Auditor Akira Tanaka Shuichi Nakajima
100
Independent Public Auditors
Shin Nihon & Co. Kiyomi Iwamura
Standing Corporate Auditor
Consolidated Subsidiaries (As of November 30, 2003)

UNIQLO (U.K.) LTD. Takaharu Yasumoto

25-27 Shaftesbury Avenue, London W1D 7EG, U.K. Corporate Auditor
Note: On August 7, 2003, UNIQLO (U.K.) LTD. assumed control of U.K.
operations from FAST RETAILING (U.K.) LTD., which is currently
conducting follow-up operations related to store closures. Masao Matsui
Corporate Auditor
FAST RETAILING (JIANGSU) APPAREL CO., LTD.
1 Zhaofeng Road, Kunshan Caoan Development Area, Naoki Otoma Makoto Hayashi
Jiangsu, China Tatsuo Kubota
Corporate Auditor
FR FOODS CO., LTD.
5-17-8, Yotsuya, Fuchu City, Tokyo 183-0035, Japan

39
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